VAT - Am I acting as an agent? - The Book-keepers Forum (UK)

Music Mogul · Newbie

VAT - Am I acting as an agent?

Shamus · Forum Moderator & Expert

Hi Ted,

Sorry, it's the option that you don't want!

The money goes to you for a service that you supply by sub contracting it to the musicians. You are hence responsible for the VAT on the whole sum coming to you.

Basically VAT is chargeable on the whole amount regardless as to whether your musicians are VAT registered.

I would imagine that your competition suffer in a similar way and that you have been able to grow thus far by undercutting them by the 17.5%. The same happens in many industries.

However, are you not in a position where the musicians are contracted to you so you are actually supplying entertainment based on quality of service that may be able to whether an moderate increase in fee's.

Sorry, don't know your market so just a suggestion.

The answer to the question though was that you are responsible for the VAT on the whole sum regardless.

Good luck with the business and hope that it all works out.

Shaun.

RobH · Expert

Hi Ted,

I concur with Shaun. I have a client who has two companies that are record producers and he falls into a similar trap with his various artists.

However, would it be possible for your individual bands/groups to invoice the venue/client directly for the whole amount and then you invoice the band with your margin? I'm guessing this is what a lot of agents do. It would mean being totally upfront about costs and stuff and you ptentially lose some control, however if you have the bands in a contract then there shouldn't be a problem.

Actually I have another great idea, you could do some auditions on the telly overa number of weeks just before Christmas, oh think that ones already been done!

Rob

Peasie · Expert

RobH wrote:

Actually I have another great idea, you could do some auditions on the telly overa number of weeks just before Christmas, oh think that ones already been done!

I don't think it is being done just before Christmas in future. I'm sure I read Simon Cowell wasn't going to be available in that time slot next time around.....nothing to do with the public telling him they had had enough of his Christmas chart manipulation.

Shamus · Forum Moderator & Expert

Hi Rob,

just realised, we always give a bit of value added advice as well don't we.

Must have become ingrained in us over a period of time and we don't even notice that we go beyond what is actually being asked.

Sort of fits in with Bob the crunchers idea's about how one actually offers an all round service and we don't even realise that we're doing it!

Don't know about you but I always try to put myself in the shoes of the person whose business it is and think what would I do in their situation.

In this instance where we're talking agents I don't think Ted would be that happy about the musicians finding out what he actually charges for their services. It also makes this more of an introductions business rather than a full package entertainment business with the bands indistinguishable from the agency arrangement.

I don't feel that would be the way that Ted would want to go as it's probably going against his current business model.

And before anyone has the bright idea of having multiple businesses each under the threshold, HMRC are wise to that and all businesses under common ownership / management can be included in determining the liability for VAT registration.

Other alternatives could be :

Stay small. (Probably not where you want to be).

Take the VAT hit but reduce the amount paid to the musicians to retain the profit margin.

Take a partial hit by increasing fees by what the market will bear and still remain cheaper than the competition.

If it looks as though registration will cripple the business, sell the existing business whilst it is still profitable and start again. (Always good to have an exit strategy).

Sure that you can think of loads of others Rob.

RobH · Expert

I feel somewhat cheered by this news!

Shamus · Forum Moderator & Expert

Nice Pic Peasie,

Robs got one just like it on his drive!

On the sure fire Christmas hit front I actually preferred the track "Killing in the name of" to the vile mundane offerings of Cowel and co.

Only good thing about the X factor is the first few weeks of no hopers that they drag out. Love the "Next year I'll be famous, then you'll be sorry".... How can you ever tire of that!

Of course, next year I'll be a millionaire...

RobH · Expert

Hi Shaun,

Yes we do offer a lot of business suggestions on top of the raw answers to questions, the ideas just tend to hit me halfway through writing something, which is why my postings tend to be a little messy!

I don't think my idea was necessarily the one that would appeal to Ted either but you throw a few things in the air and something may get caught (No that is not a Carry On reference...ooh matron!).

the other thing about the multiple businesses each under the threshold is that with a sole trader of course it is the person who is vat registered and not the business I think you'll agree Shaun that a lot of people overlook this), so it would have to be by creating a new company. I think if the activities are different enough this can happen, but they raelly have to be very different supplies.

Speak later,

Rob

RobH · Expert

Typical, Batman gets the Batmobile and reliable Robin gets the Reliant Robin!

Music Mogul · Newbie

Thanks for the responses guys even though it wasn't the news I wanted

So if we were to reliquish ownership of the bands and act only as agents for them then could we then only add VAT to our %?

If this is a yes then carrying on from this could we get the bands to sign an exclusivity deal that makes us their sole agent?

Thanks

Ted

RobH · Expert

ted you would need to talk to a solicitor regarding any exclusivity deals/contracts.
If you went down the road of getting the individual bands to invoice directly, they would invoice their amount plus whatever you have on top, eg, if they charged £1000 for a gig and they would normally get £800 and you £200 for finding them the work etc, then you would invoice the band £200. So long as you remained beneath the vat thteshold of £68k then you would not need to register for vat and theerfore not charge it. Remember the threshold works on a 'rolling' 12 months and not your financial year, i.e when you have traded 13 months, knock off the turnover for month 1 and calculate from month 2 to 13, then month 3 to 14 etc.

Rob